Greater structural transparency and deal standardisation will be needed to give investors confidence that their deals can be traded, said David Mandel, director at Citi.
Steven Moffit, managing director at Goldman Sachs agreed, saying: “Investors are putting a much greater premium on that, compared to six months or a year ago.”
Credit has only weakened slightly, and, though further upticks in delinquencies are widely expected, it isn’t enough to justify the spread widening seen recently.
Ram Ahluwalia, CEO of PeerIQ, said: “There’s been a mild uptick in delinquencies – around 30bp-50bp… but that’s low if you look at historical credit card charge off rates.”
Moffitt added that 200bp widening in a senior bond with a 1.7 year duration and credit enhancement is out of whack with credit fundamentals. “The market needs investors to have a convicted view,” he said. “We haven’t seen that.”
Marketplace ABS has been the subject of a host of negative headlines in the last year as noise increases around regulatory headwinds, political scrutiny and fears over weakening credit conditions.
“I think a lot of those risks are overstated,” Moffit said.
Stefan Wolf, head of capital markets and portfolio manager at Eaglewood Capital Management, agreed with that assessment, saying: “We don’t see the super increased default rates people say they see in the news a lot.”